by Mandakini Gahlot, Special for USA TODAY

by Mandakini Gahlot, Special for USA TODAY

PUNE, India - The Indian government demanded Wednesday that the U.S. Embassy in New Delhi cease all commercial activities - including the running of its restaurant, bowling alley and swimming pool - in a spat over the arrest of an Indian diplomat in New York.

India has been apparently retaliating against America's diplomats in a campaign to pressure the U.S. attorney in New York to waive charges against Devyani Khobragade, an Indian diplomat who was strip searched by U.S. marshals when arrested in December.

Khobragade was apprehended on suspicion of not paying her maid the federal minimum wage and lying about it on her visa application. Khobragade, 39, pleaded not guilty to fraud charges and is free on bail while a federal prosecutor mulls whether to go ahead with the case.

The charges have caused an outcry among politicians especially in India, where the idea of an educated, middle-class woman facing a strip search is seen as outrageous. The U.S. Marshals Service said it was following standard procedure during the arrest.

Since the arrest, India downgraded privileges for U.S. diplomats in India. It limited immunity in cases of serious offenses and decided that families of U.S. consular staff will no longer get diplomatic ID cards.

India on Wednesday ordered the American Community Support Association, which runs leisure offerings at the U.S. Embassy in New Delhi, to shut down its businesses, which include a bar, video club, sports field, beauty salon and gym.

In addition, all U.S. diplomatic vehicles will now be penalized for traffic-related offenses such as unauthorized parking and running red lights.

"Some retaliation has occurred," said Shashi Tharoor, India's minister of human resource development, in an article on the Prague-based website Project Syndicate.

"The initial American rationale (that foreign consuls in the U.S. enjoy a lower level of immunity than other diplomats) led India's government to re-examine privileges enjoyed by U.S. consular officials that are unavailable to their Indian counterparts in the U.S.," he added.

The Indian government says providing commercial services to non-diplomats is a violation of the Vienna Convention on Diplomatic Relations, which states that "the premises of the mission must not be used in any manner incompatible with the functions of the mission."

But India's external affairs minister Salman Khurshid denied the actions were retaliatory, saying the latest move is based on "reciprocity not hostility."

On Khobragade, he said India was "preserving the dignity" of its diplomatic service and said the Indian government demanded justice.

"Our position is very clear. She is an Indian diplomat. She is the face of Indian diplomacy in the U.S. among others including our ambassador," Khurshid said. "We expect a friendly country like the U.S. to do what a friendly country does."

The U.S. attorney's office in New York has said that Khobragade does not enjoy diplomatic immunity according to the law.

Tharoor defended Khobragade's treatment of her Indian maid, saying the maid had a fully furnished room in a Manhattan apartment, a television set, a mobile phone, medical insurance and airline tickets home. He says the maid was paid a wage competitive with what maids make in India.

"Most developing-country diplomats take domestic staff with them on overseas assignments, paying them a good salary by their national standards, plus a cost differential for working abroad," he said.

"The cardinal principle of diplomatic relations is reciprocity, and India realized that it had been naive in extending courtesies to the U.S. that it was not receiving in return," he added.